“In terms of the Bitcoin ecosystem among African Americans, it really doesn’t offer any benefit over any other demographic,” he notes. That said, he does think it could be quite useful for Africans and Afro-Caribbean natives living in America who want to send money, at a lower cost, to relatives in other countries.
Nicholas Pearce, an assistant professor at Northwestern University’s Kellogg School of Management, does perceive some value in African Americans adoption of Bitcoin, particularly among those who rely significantly on pre-paid cards and currency exchanges to manage their money.
“Bitcoin can be a very useful tool to engage historically under-engaged populations into more digital transacting,” Pearce says. “One thing that is true of any type of innovation of this sort is that there are going to be some people who are early adopters, and Bitcoin is an answer to a problem they have had for years.”
Nonetheless, Pearce stops short of a full-on embrace of the currency, and he's not convinced that anyone besides early adopters will start using it in the black community. “For African Americans in particular, I think the issue with Bitcoin is that it stimulates arms-length transactions,” he says. “In the African American community, by and large, people tend to be more relationship-oriented than transactionally-driven."
Pearce believes there's a distrust in the black community of the financial landscape at large—a distrust that might go back as far as the bank runs from the Depression era. “The fact that many African Americans don’t use PayPal," he says, "or are even afraid to do retail banking, demonstrates this lack of trust in financial institutions, even when there is a face on the other side. Many times, you’ll hear them say, ‘I don’t trust banks, I’d rather put my money under a mattress and risk it being stolen than put it in a bank for some unnamed institution to steal it.’”
Additionally, Bitcoin's volatility might raise red flags in the black community. African Americans are, to be sure, a powerful consumer force—a Nielsen study last year projected that the buying power of the demographic would reach $1.3 trillion by 2017. But black wealth continues to lag considerably behind that of whites, and according to a study released last year by the Center for Global Policy Solutions and Duke University, black households own only five cents of wealth for every dollar owned by whites.
That level of economic disparity means that African Americans accumulate less less in savings and stock holdings compared to other groups—which doesn’t make the strongest case for owning an asset as volatile as Bitcoin. And this is to say nothing of the security worries surrounding the currency, which were proved at least somewhat valid after Mt. Gox, the leading Bitcoin exchange, was hacked in 2013, costing investors hundreds of millions of dollars. For most African American investors, these effects can be disproportionately devastating.